Monday, June 16, 2014

Ten Dividend Increases For Further Review

As a dividend growth investor, I spend several hours per week screening for attractive candidates for my portfolio and then researching them in detail. I believe in fundamental analysis first and foremost. I look for stability and stimulants for growth in earnings that can deliver strong dividend growth and stock price gains in the future. I also believe in regular monitoring of dividend growth stocks, in order to check how companies I own are doing. One aspect of monitoring involves checking for any recent dividend increases for every company in the US. That way I can not only monitor my holdings, but also find out about prospective dividend growth stocks at the start of their potential long journeys to stardom.

Over the past week, there were several dividend growth stocks that announced their intent to increase distributions to shareholders. I only included those that have managed to increase dividends for at least one
decade. The companies include:

Target Corporation (TGT) operates general merchandise stores in the United States and Canada. The company raised its quarterly dividends by 20.90% to 52 cents/share. This dividend champion has increased dividends for 47 years in a row. In the past decade, the company has managed to increase dividends by 19.80%/year. The stock is attractively valued at 15.50 times forward earnings and a current yield of 3.60%. Despite headwinds that the company has faced in the past year, I find the stock to be attractively valued, and I have been adding to my exposure several times so far this year. Check my analysis of Target.

Casey’s General Stores, Inc. (CASY), operates convenience stores in 14 Midwestern states, primarily Iowa, Missouri, and Illinois. The company raised its quarterly dividends by 11.10% to 20 cents/share. This dividend achiever has increased dividends for 15 years in a row. In the past decade, the company has managed to increase dividends by 19.10%/year. The stock is attractively valued at 20.10 times forward earnings and a current yield of 1.10%. Check my analysis of Casey’s General Stores.

Caterpillar Inc. (CAT) manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. The company raised its quarterly dividends by 16.70% to 70 cents/share. This dividend achiever has increased dividends for 21 years in a row. In the past decade, the company has managed to increase dividends by 12.70%/year. The stock is attractively valued at 17.20 times earnings and a current yield of 2.60%. Check my analysis of Caterpillar.

Universal Health Realty Income Trust (UHT) is a real estate investment trust, that invests in healthcare and human service related facilities. The company raised its quarterly dividends by 0.80% to 63 cents/share. This dividend champion has increased dividends for 28 years in a row. In the past decade, the company has managed to increase dividends by 2.40%/year. This REIT currently yields 5.85%. I sold my stake in the company last year, given the anemic dividend growth of the past and do not plan on initiating a position again.

C. R. Bard, Inc. (BCR) designs, manufactures, packages, distributes, and sells medical, surgical, diagnostic, and patient care devices worldwide. The company raised its quarterly dividends by 4.80% to 22 cents/share. This dividend champion has increased dividends for 43 years in a row. The stock is attractively valued at 16.60 times earnings and a current yield of 0.60%. In the past decade, the company has managed to increase dividends by 6.20%/year. Ordinarily given the low yield and low dividend growth, I will take a pass at this time. However, there is something about C.R. Bard’s relentless increase in earnings per share that makes me really want to add the stock to my list for further research.

National Fuel Gas Company (NFG) operates as a diversified energy company in the United States. The company raised its quarterly dividends by 2.70% to 38.50 cents/share. This dividend champion has increased dividends for 44 years in a row. In the past decade, the company has managed to increase dividends by 3.40%/year. The stock is overvalued at 21.50 times forward earnings and a current yield of 2.10%. Given the low growth, I would take a pass on it for the time being.

Oil-Dri Corporation of America (ODC) mines, develops, manufactures, and markets sorbent products in the United States and internationally. The company raised its quarterly dividends by 5.30% to 20 cents/share. This dividend achiever has increased dividends for 12 years in a row. In the past decade, the company has managed to increase dividends by 9.60%/year. The stock is attractively valued at 16.40 times forward earnings and a current yield of 2.70%. I would add it to my list for further research.

Essex Property Trust, Inc. (ESS) is a real estate investment trust in the United States that engages in the ownership, operation, management, acquisition, development, and redevelopment of apartment communities, as well as commercial properties. The company raised its quarterly dividends by 7.40% to $1.30/share. This dividend achiever has increased dividends for 20 years in a row. In the past decade, the company has managed to increase dividends by 4.30%/year. This REIT yields 2.90% today, which I believe to be low for a pass-through entity these days.

Best Buy Co., Inc. (BBY) operates as a multi-national, multi-channel retailer of technology products in the United States, Canada, China, and Mexico. The company raised its quarterly dividends by 11.80% to 19 cents/share. This dividend achiever has increased dividends for 12 years in a row. In the past decade, the company has managed to increase dividends by 13%/year. The stock is attractively valued at 12.60 times forward earnings and a current yield of 2.60%. I need to add Best Buy on my list for further research.

FedEx Corporation (FDX) provides transportation, e-commerce, and business services in the United States and internationally. The company raised its quarterly dividends by 33.30% to 20 cents/share. This dividend achiever has increased dividends for 12 years in a row. In the past decade, the company has managed to increase dividends by 10.70%/year. The stock is overvalued at 21 times forward earnings and a current yield of 0.60%. I would add it on my list for further research.

Full Disclosure: Long TGT, CASY

Relevant Articles:

How long does it take to manage a dividend portfolio?
Buy and Hold means Buy and Monitor
Dividend Champions - The Best List for Dividend Investors
Dividend Achievers Offer Income Growth and Capital Appreciation Potential
How to read my weekly dividend increase reports

11 comments:

  1. Why don't you consider to add more AFLAC to your dividend portfolio?

    Sorry for my bad expression but I'm a Spanish speaker :/

    Kind regards

    ReplyDelete
    Replies
    1. Thank you for reading DGI blog! Gracias Senior!

      I own a lot of AFL,I like the company. Check this analysis:

      This list shows companies which have increased dividends in the past week.

      Best Regards,

      DGI

      Delete
  2. Symbol for Oil-Dri Corporation of America is ODC not ODS.

    ReplyDelete
  3. FedEx current yield is 0.6% and that interests you? Ok, you're looking at the growth, but eventually you want it to amount to something and 0.6% seems too big a mountain to climb doesn't it? What am I missing in my thinking? I generally don't look at growth, it seems to hard to predict. It's just something I hope for :).

    ReplyDelete
    Replies
    1. Hi Booban,

      If you are only looking at one aspect, such as yield or growth only, one might be doing themselves a disservice.

      I am trying to learn as much as possible about different businesses out there. FDX is an interesting company to learn from. It is a competitor to UPS, which has a higher yield. Also, I am trying to balance yield and growth. But the thing that really matters in investing success is underlying growth in dividends, that is fueled by growth in EPS. Yield should be the last thing to look at. Even if you start at an yield of 0.60% today, a company like FDX could end up yielding a lot on ccost in 30 years, given the low payout today. Of course the stock is overvalued, so it is just something to research. And of course, I mentioned in the article how the list was compiled. IT is not a recommendation to buy or sell.

      Delete
  4. DGI, I have considered BBY as a position but they don't seem to be changing much in the way they do business. I always ask myself if Best Buy will be around in the next 20 years and I seem to always lean towards probably not. The stores are empty and products are overpriced. They are not offering best buys on products and I can usually get it for 20% less on amazon. What do you think?

    ReplyDelete
  5. I think BBY will go the way of Circuit City within 10 years. Not only them but also Sears. Think their days are numbered. Shorting these companies will probably earn you more than investing in them.

    ReplyDelete
  6. Hi DM and Anon,

    The retail business is getting pressure from online, which is disrupting bricks and mortar stores. It is difficult to compete with someone, who sells a comparable product at almost at cost. I guess all of us have been hearing the same things about retailers like Best Buy. At some point however, one has to challenge "conventional wisdom", and not take everything you hear for granted. Either way, BBY is not within my circle of competence, although I do enjoy learning about the business. For example, if someone had purchased shares of Sears in 1993, they would have done slightly better than S&P 500 over the next 20 years. So even if you have a bias against a company, or everyone else hates it leading to very good valuations at entry, there could be just one little positive thing that can still result in satisfactory performance for the investor.

    If course, if you think BBY is not in your circle of competence, or don't see it there in 20 years, don't buy it. As Buffett said, time is an ally of a great business, and an enemy to the mediocre one - so let's meet in 2034 and see how this works out. As for shorting, it is tough to do, even if you think the company is junk. You pay fees to short stocks, pay the dividends, and your risk of loss is unlimited.

    ReplyDelete
  7. Hello DM, How many stocks will i need in order to make 5,000. a month in dividends or earning each month for the rest of my life your input is greatly Appreciated . kind regards Ismael

    P.S. I have a list of 8 sector i'm starting with 100 share of each stocks i'm also adding riets and MLPS

    ReplyDelete
  8. So, CASY is attractively valued at 20, but FDX is overvalued at 21? With no other information supplied, such as some factoring in of growth, etc, is the acceptable cutoff somewhere between 20 and 21?

    ReplyDelete

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